Businesses have sought to build and maintain customer loyalty with reward programs for decades. Unfortunately, such schemes are fundamentally flawed, and often fail to fulfill their basic purpose.
Now experts believe that cryptocurrency tech could eclipse and even usurp traditional loyalty initiatives, creating an intriguing set of possibilities for the future of customer relationship management.
Why loyalty programs are on the ropes
The main reasons for the slow death of loyalty programs are fragmentation and friction. Customers need to have loyalty accounts with lots of different businesses, many of which are entirely independent of one another.
Even those that are cross-compatible place a number of obstacles between earning reward points and redeeming them, meaning that many customers simply don’t bother. This creates additional admin and a financial burden for the businesses that operate them, without actually boosting loyalty in a meaningful way.
Why Bitcoin is better
There are a number of reasons behind the rise of crypto-based loyalty projects, with Bitcoin being the best known and most widely accepted of the assets in this context.
First, learning how to buy crypto currency is a breeze thanks to the cavalcade of high quality, properly regulated exchanges and investment operators there are in this space, says Sofi.
The blockchain technology which underpins crypto tokens also makes it simple to monitor and track transactions, as well as integrating them with whatever third party service a business might need, including a loyalty program.
Then there’s the promise of improved security, and the decentralization of the infrastructure which ensures that individual organizations don’t need to take sole charge of the procurement and upkeep of any hardware or software to host their rewards scheme. Given that loyalty schemes have been retired previously, the lower overheads involved in crypto alternatives are reassuring.
What matters most from a customer perspective
So far the advantages of having a Bitcoin-based loyalty program seem to tip in favor of brands, but there are perks from a customer perspective as well.
Perhaps most importantly, it’s a way of introducing the concept of crypto ownership to a mainstream audience; one which until this point may have been too intimidated by the apparent complexity of this marketplace to get involved.
When brands hand out crypto rewards to loyal customers, more people have the opportunity to tinker with it and perhaps get into trading and investing in digital assets. Since the market as a whole is reliant on growth coming from more people joining the fray with their capital, this is certainly significant.
It’s also a movement that addresses the aforementioned issue of utility. Loyalty points earned in traditional schemes tend to be inflexible and non-transferrable. Bitcoin is a globally recognized currency which can be used to buy goods and services in more and more places every day (more details).
So if customers know that the rewards they earn from the brands they love aren’t an annoyance, but rather something with real, transferrable value, the proportion of people making use of them will increase.
Is this a realistic prediction of things to come?
Of course there’s no getting around the fact that, for the time being at least, Bitcoin and other cryptocurrencies have not yet toppled old-school loyalty programs.
It’s difficult to predict whether they will achieve this further down the line, especially at a time when the volatility of this particular marketplace is so noteworthy.
With established loyalty schemes, the value of points earned doesn’t fluctuate much, if at all. Meanwhile as Bitcoin can rise and fall in value by thousands of dollars day by day, the lack of certainty might breed caution in some circles, says Time.
It will be a few years yet before things become clearer, but underestimating cryptocurrencies has proven unwise in the past.
Last Updated: November 18, 2022